Moneycontrol PRO
Check Credit Score
Check Credit Score
HomeNewsBusinessCompanies

Fortis Healthcare says lockdown impacted operations, cuts fixed costs by 25%

The company said it does not expect any impact on its current ability to service debt

June 18, 2020 / 04:48 PM IST
 
 
live
  • bselive
  • nselive
Volume
Todays L/H
More

Fortis Healthcare said the nationwide lockdown due to novel coronavirus, or COVID-19, has negatively impacted occupancies across its hospital network. The company said it continues to face challenges in Q1F Y21, impacting its financial performance.

India's second largest hospital chain saw occupancy levels plummet to 29 percent in April due to a lockdown to contain COVID-19 from 71 percent in early March.

With the government gradually easing lockdown restrictions, the company said it is seeing occupancy levels climbing to 45 percent, but the same is nowhere close to what it was seeing before the outbreak of the pandemic.

"While revenue saw a sharp reduction in April, May exhibited signs of an early and gradual recovery," Fortis said in a statement.

"The impact of the pandemic is expected to continue throughout the April-June quarter and beyond till visible and sustainable signs of stabilisation and normalisation can be seen," the statement added.

COVID-19 Vaccine

Frequently Asked Questions

View more
How does a vaccine work?

A vaccine works by mimicking a natural infection. A vaccine not only induces immune response to protect people from any future COVID-19 infection, but also helps quickly build herd immunity to put an end to the pandemic. Herd immunity occurs when a sufficient percentage of a population becomes immune to a disease, making the spread of disease from person to person unlikely. The good news is that SARS-CoV-2 virus has been fairly stable, which increases the viability of a vaccine.

How many types of vaccines are there?

There are broadly four types of vaccine — one, a vaccine based on the whole virus (this could be either inactivated, or an attenuated [weakened] virus vaccine); two, a non-replicating viral vector vaccine that uses a benign virus as vector that carries the antigen of SARS-CoV; three, nucleic-acid vaccines that have genetic material like DNA and RNA of antigens like spike protein given to a person, helping human cells decode genetic material and produce the vaccine; and four, protein subunit vaccine wherein the recombinant proteins of SARS-COV-2 along with an adjuvant (booster) is given as a vaccine.

What does it take to develop a vaccine of this kind?

Vaccine development is a long, complex process. Unlike drugs that are given to people with a diseased, vaccines are given to healthy people and also vulnerable sections such as children, pregnant women and the elderly. So rigorous tests are compulsory. History says that the fastest time it took to develop a vaccine is five years, but it usually takes double or sometimes triple that time.

View more
Show

Fortis said the drop in occupancies and revenue was to due postponement of elective procedures; significant drop in footfalls in outpatients department (OPD); inter-state and intra-state movement restrictions; and designating two major hospitals in Vashi, Navi Mumbai and Vasant Kunj Delhi as COVID-19 hospitals, impacting flow of normal patients.

Diagnostic volumes too dropped by 60 percent as people are postponing non-emergency diagnostic tests.

The company recorded a profit after tax of Rs 58 crore in FY20 against a loss of Rs 299 crore in the previous year. Revenue grew 3.6 percent year-on-year to 4,632 crore. Earnings before interest, tax, depreciation and amortisation (EBITDA) margin doubled to 14.3 percent.

The management said despite a challenging environment, it has managed its liquidity position via cost efficiency initiatives, better working capital management and external funding. It does not expect any impact on its current ability to service debt.


IHH-Fortis deal still not clearedThe COVID-19 pandemic hit Fortis at a time when the healthcare provider has been charting a turnaround story with Malaysia’s IHH Healthcare, winning the bid to acquire the healthcare provider by infusing Rs 4,000 crore by way of preferential allotment in July 2018.

IHH also completed the acquisition of assets under RHT in January 2019, saving Fortis the entire clinical establishment fee being paid to RHT. Fortis hospital assets are housed under RHT, which is listed in Singapore. However, the proposed open offer to acquire up to 26 percent of the expanded capital of Fortis was stayed by Supreme Court in a case related to Daiichi Sankyo versus Singh brothers over Rs 3,500-crore arbitration.

The company said it had filed an urgent application for an early hearing on June 9, however, the application was not accepted by the court. The company again made a written request on June 12 to the Registry of the apex court to reconsider the urgent listing. Fortis said the matter is expected to be listed before Supreme Court on July 6  and the company is reviewing all legal options.


Cost cuttingMeanwhile, Fortis said it was able to reduce fixed costs by 25 percent.

The company said this they achieved primarily through voluntary salary reduction in both medical and non medical manpower; judicious capex spend; and delaying the launch of its ready to commission facility at Arcot Road, Chennai.

The company is also going slow and selective on hiring for next two-to-three months, reducing housekeeping and manpower cost and optimising other expense lines.

The management said it is in discussions for deferment, waiver and contract annual maintenance contract (AMC) renegotiations.

first published: Jun 18, 2020 04:48 pm

Discover the latest business news, Sensex, and Nifty updates. Obtain Personal Finance insights, tax queries, and expert opinions on Moneycontrol or download the Moneycontrol App to stay updated!

Advisory Alert: It has come to our attention that certain individuals are representing themselves as affiliates of Moneycontrol and soliciting funds on the false promise of assured returns on their investments. We wish to reiterate that Moneycontrol does not solicit funds from investors and neither does it promise any assured returns. In case you are approached by anyone making such claims, please write to us at grievanceofficer@nw18.com or call on 02268882347